Another Greek exit looms

03 February 2016 5:59 pm

The risk of Greece leaving the European Union could be back sooner than you think.

On Monday, Greek officials and international creditors began a first review of Greece’s bailout as protests grow against the overhauls needed to secure further rescue funding. Representatives from Greece’s creditors—the eurozone and the International Monetary Fund—who arrived in Athens over the weekend have to thrash out the thorny issue of pension reforms with Finance Minister Euclid Tsakalotos. And Greece needs to wind up this review of the country’s third bailout, worth up to €86 billion ($93 billion), before being able to start negotiations with lenders over debt relief.

The Greek economy is still in intensive care. After defections, the parliamentary majority of Tsipras’s SYRIZA Party has all but vanished. Lawyers, doctors, pensioners and engineers have taken to the streets to protest against a planned pension reform, and truck drivers are threatening to do the same. It’s hardly surprising with more than half the Greek households relying on a pension

Meanwhile, Greek officials are struggling to deal with the thousands of refugees who are still crossing the Aegean Sea to land on Greek shores. International NGOs and hundreds of volunteers are doing much of the hard work on Greek islands such as Lesbos.

Avoiding a rerun of the earlier drama requires a double success – not just steady commitment on Greece’s side but also greater flexibility from its European partners. And the real test will come when Tsipras tries to get Parliament to approve much-needed reforms of the pension system. Bail-out monitors say they can’t release the next tranche of funds until the pension reforms are approved by the Greek parliament. At the World Economic Forum in Davos last week, Mr Tsipras was told that vigorous reforms are the price for any more IMF help.

The problem is that Greece’s debt crisis is only one of a number of crises that Europe currently faces. It’s now dealing with the overwhelming influx of refugees, Britain’s renegotiations on its position in the Union, and the ongoing Ukrainian crisis.

The deadline for releasing funds for Greece will come when Greece runs out of money and cannot afford a debt repayment. This will come in July, when Greece has to roll over over €3.5 billion in debt.

The problem is Greece by July will have bigger issues. The flow of refugees from the Middle East has fallen from over 200,000 in October 2015 to over 50,000 in January 2016. But let's be clear about one thing: it will pick up again as the weather improves.

Meanwhile, the rest of Europe is complaining that Greece is not following the rules on registering refugees that come across the Aegean via raft from Turkey.

“If Greece fails to fulfill its commitments to protect its borders and establish hotspots for refugees, goodwill among creditors to find agreement on the bailout negotiation in July will in short supply,’’ Megan Greene writes in Politico.

Hotspots? Does she mean prison camps? The bottom line is that Greece is again being made the whipping boy for a problem created by Turkey. Let's be clear about one thing: Turkey is refusing to stop the refugee flow in part because that gives it a powerful bargaining chip with the Europeans and the US.

Last year, Greece was targeted because of problems with the way the EU was structured, now it’s likely to be victimised for the treatment of refugees. Too bad about the impact it will have on the people of Greece.